'German industry has entered the current quarter with a lot of momentum' - Heinrich Bayer, an economist at Deutsche Postbank AG
Output at German manufacturers improved unexpectedly in March, reviving hopes about the strength of Europe's biggest economy. Production increased 1.2% from February, when it gained 0.6%, the Economy Ministry said Wednesday. Analysts, however, expected a 0.1% decline. Earlier this month, there were concerns that the German economy is heading for a contraction in the second quarter of 2013, as the unemployment rose and the business sentiment deteriorated. However, an improvement in the factory orders and the industrial output are diminishing chances of another contraction.
'German industry has entered the current quarter with a lot of momentum,' said Heinrich Bayer, an economist at Deutsche Postbank AG in Bonn. 'We expect a strong pickup in growth this quarter after a 0.2 per cent increase in gross domestic product in the first quarter.'
'It looks as if the outlook for German industry is clearing slowly but surely,' said ING senior economist Carsten Brzeski. 'There's a lot of contradictory signs... but industrial production looks OK. We will get out of the contraction of the fourth quarter and though we're not accelerating as much as in 2010, we won't have a recession.'
USD
'They say that they're going to set monetary policy in a way that ensures future inflation will be 2.0 per cent" - Justin Wolfers, an economics professor at the University of Michigan's Gerald Ford School of Public Policy
With consumer prices around the half of the Federal Reserve's 2% target, the U.S. central bank is facing a serious test, and some experts even believe that the Fed will have to increase its asset-purchase programme. According to American Century Investments, inflation rate was lower during the last several years, and they expect it to remain largely contained in 2013. During 2013 the inflation rate is likely to increase 1.5-3%. Since 2008, when the Fed has cut interest rates to zero, it has bought more than $2.5 trillion in bonds to bolster an anemic economic recovery and speed up the decline in the closely-watched unemployment. Despite all bold actions done by the Fed, the Personal Consumption Expenditures (PCE) price index has fallen to a 3-1/2 year low of 1.0%. However, the Fed officials do not view the slowdown as a signal of a worrying deflationary threat.
'They say that they're going to set monetary policy in a way that ensures future inflation will be 2.0 per cent,' said Justin Wolfers, an economics professor at the University of Michigan's Gerald Ford School of Public Policy. 'Right now, they expect it to be lower than that, and unemployment to be unconscionably high, so the Fed's own framework says that they need to take more stimulative action.'
GBP
'House prices continue to pick up gradually" -Martin Ellis, housing economist at Halifax
Britain's home prices soared to the highest level in almost three years, helped by low mortgage repayments, which boosted demand for property. According to the data provided by Halifax, home values gained 1.1% in April from the previous month to an average 166,094 pounds ($257,200). Year over year, prices rocketed 3.6%. The Bank of England added that the number of mortgage approvals for house purchases increased 3% between February and March following two successive monthly falls. The FLS of 'Funding for lending scheme' was launched by the BoE and the Treasury in July 2012 aimed at boosting lending to households and businesses.
'House prices continue to pick up gradually,' said Martin Ellis, housing economist at Halifax. Still, 'weak income growth and continuing below-trend economic growth are likely to remain significant constraints on housing demand during the remainder of 2013.'
'It is hard to see how any house-price recovery can be sustained,' Matthew Pointon, property economist at Capital Economics Ltd. in London, said in a research note. 'We expect that prices will continue to mark time, with record low mortgage rates helping to prevent significant price falls, but a weakening labor market weighing down on any gains.'
JPY
'I expect the BOJ to maintain its stance of supporting the economy' - Yasuhide Yajima, the chief economist at NLI Research Institute Ltd.
Japan's leading indicator declined in March following a strong growth in the previous month, according to data released by the Cabinet Office. The leading economic index fell to 97.6 in March from a revised 97.7 a month earlier, while economists expected the index to advance to 97.7 from February's originally recorded 97.6. The index of leading economic indicators is compiled using such data as the number of consumer sentiment, job offers, and a gauge of the economy a few months ahead and is used to forecast financial and economic trends.
Meanwhile, the coincident economic index, which evaluates the current economic situation in the country, increased to 93.3 in March from 92.5 in the prior month, adding to signs that the economy is on a path of steady recovery. Another indicator, the lagging index, which measures the past performance of the economy, rose to 87.1 from 86 in February.
'I expect the BOJ to maintain its stance of supporting the economy' by keeping a lid on yields, said Yasuhide Yajima, the chief economist at NLI Research Institute Ltd.
CHF
'The Eurozone crisis is weighing on Switzerland, which is much intertwined with the euro zone economies' -Sarasin economist Jan Poser
Consumer prices in Switzerland extended their longest slump in at least four decades in April, raising concerns that the debt crisis in the neighbouring Eurozone weighed on Swiss consumers. On a yearly basis prices decreased 0.6% in April after dropping 0.6% in March, the Federal Statistics Office said Wednesday. At the same time, they were flat in the month. Economists, however, expected an annual drop of 0.5% and a monthly increase of 0.1%. The SNB has imposed a Franc ceiling of 1.20 versus the Euro in September 2011 in order to fight the deflation. Even so, the latest data is showing that consumer prices have continued to fall and are now in their 19th consecutive month of annual declines, which is the longest stretch since 1971.
'The Eurozone crisis is weighing on Switzerland, which is much intertwined with the euro zone economies,' said Sarasin economist Jan Poser. 'I wouldn't attribute the fall in exports too much to the strong Swiss franc, although it remains a headwind.'
'The story in my view is that prices for imported goods are still falling, despite the Swiss National Bank's defense of the 1.20 floor,' said David Marmet, economist at Zuercher Kantonalbank. 'This helps the SNB maintain its monetary policy, and I see no signs of it changing. We believe the SNB will maintain the cap well into 2014.'
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